Thursday, August 21, 2014

Xi Jinping looks to deepen ties in visit to 'wary' Mongolia

Xi Jinping's two-day state visit to Mongolia beginning today will see China and Mongolia boost trade and economic ties, but Mongolia is cautious not to become overly dependent on China.

In the first visit to Mongolia by a Chinese president in over a decade, Xi hopes to sign a series of energy and infrastructure deals with its landlocked, mineral-rich neighbour, and discuss implementing the Silk Road economic belt - which aims to increase cooperation in railway lines, pipelines and highway construction.

"Mongolia is seeking to diversify its export partners to reduce China's overwhelming control of its economy," said Dr Alicia Campi, a Mongolia expert and former diplomat in Ulan Bator.

"In order for Mongolia's economy to continue to develop quickly, it must continue to depend on Chinese [investment] and the Chinese market", Campi said, but added: "Mongolia wants to be more active in the Northeast Asian region and not just a passive observer."

Assistant Foreign Minister Liu Jianchao said on Monday that China would sign the energy and infrastructure deals as part of Xi's visit. The trip would also address plans for Mongolia to build transport links with China.

Chinese companies operate in several major sectors in Mongolia, most importantly the mining, construction and trade services. Mongolian Economy, a Mongolian business magazine, estimated recently that 80 per cent of the country's imports were from China, and that 30 per cent of Mongolian exports went to its southern neighbour.

In May, the Mongolian government submitted a resolution to parliament to allow a combination of both Chinese and Russian-gauge rail tracks. If approved, the resolution would see an international-standard railroad shared between China and Mongolia for the first time.

Despite strong trade ties, analysts said Mongolia remained wary of getting too cosy with Beijing. The country was part of China until early last century.

"For years, there have been concerns on the part of Mongolians about becoming overly dependent on China as a trade partner and a source of investment," said Andrew Kuchins, director of the Russia and Eurasia Programme at the Centre for Strategic and International Studies.

"Mongolia will seek a diversified set of economic partners to avoid a monopolistic relationship with China - overdependence on one buyer."

"Politically, China is at least interested in pulling Mongolia away from Russia and the US," said Dr James Seymour, a senior research scholar at Columbia University's Weatherhead East Asian Institute.

"China wants Mongolian resources; however, the main resource, coal, is not as important as it was [and] the price has been falling," Seymour said. "So with coal becoming less important than it was, that's bad for Mongolia, but metals are more important than they were."

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